Management Accounting Report: Functions, Systems, and Costing Analysis

This report provides a comprehensive overview of management accounting, starting with an introduction to its core functions, including planning, organizing, coordinating, controlling, and communication. It differentiates between financial and management accounting, highlighting their respective roles and importance in determining business objectives and performance. The report then delves into various management accounting systems, such as managerial accounting (cost accounting), inventory accounting, job costing, and price optimizing systems, explaining their applications in improving departmental reports. A significant portion of the report focuses on costing methods, specifically absorption costing and marginal costing, demonstrated through a case study of Imda Tech (UK) Limited. The analysis includes detailed calculations of production costs, inventory valuation, and profit determination under both costing methods. Furthermore, the report addresses the importance of budget preparation and the need for manager involvement in the budgeting process. The report concludes with a discussion on the use of management accounting to address financial problems and the potential application of a Balanced Scorecard approach, as suggested by the company's auditors.

Management Accounting
Lecturer: Khalid Karim
Student: Mircea Ionut Mercioiu
ID STUDENT: 15538
BATCH: WH 29, HND Business

Table of Contents
Management Accounting.................................................................................................................1
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
P1 Prepare a well-researched written report on the functions of Management Accounting.. 3
2. Explain the different types of Management Accounting Systems and how it can be used by
other departments to improve their reports............................................................................5
TASK 2............................................................................................................................................7
Absorption costing..................................................................................................................8
TASK 3..........................................................................................................................................11
In the senior management meeting it was discussed and agreed that department................11
managers should have more involvement and take responsibility for their department.....11
budgets.Despite this news was greeted with a welcome response yet managers have.......11
requested for more information and training on budget preparation...................................11
TASK 4..........................................................................................................................................14
Imda Tech (UK) Limited has recently published their accounts for the last financial year.14
showed a loss of £1.5 million. The company is evaluating ways in which the organisation14
could use management accounting to respond to financial problems. The auditors in their14
recent report has suggested the use of a Balance Score Card approach..............................14
CONCLUSION..............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Management accounting is the system to manage and control all financial transaction of the
company. In which evaluate and determine financial positions and their financial status. T to
proper determination and evaluation there are using many techniques and methods those are
provide valuable and reliable information and data in the financial term. Management accounting
is help to control risk in the business and help to take better and effective decision to develop
business and investing into the market (Zimmerman and Yahya-Zadeh, 2011). Finance is the
important element to selling and purchasing something from the market also it is require to
manage in the systematic manner. Imda tech Limited is the charger producing company and also
gadgets retail company in the UK. In which some financial issues and problems ton employees
so their company's head want to provide a statement in which mention all financial information
regarding company so employees can easy to take effective decision on the basis of financial
availability in the company.
TASK 1
P1 Prepare a well-researched written report on the functions of Management Accounting.
Management accounting is the process in which mention all financial transaction in the company
that help to manage and control. Its help to take effective decision in the company. There are
many function of management accounting those are under the below:
Planning: Planning is the pre planned activity in which have to decide objectives and goals of the
business. In which mention company's products, services, financial capability, equity fund, debt
fund, employees, working systems and so more. Planning should effective in the nature that help
to take better decision by the employees and head of the company (Macintosh and Quattrone,
2010).
Organising: Organising means to manage and control all activities and works by using various
methods and techniques. In which arrange all functions of the company and their employees in
the systematically so they can work easily and achieve objectives and goals of the business.
Coordinating: Coordinating is the important function of management accounting in which
coordinate each employees and build good relationship with employees and employers so they
can work in unity and easy to complete the task by using optimum resources of the company.

Controlling: In which control on on activities and employees of the company. Controlling
function through manage in the systematic manner and optimum using of resource on maximum
production. By this function control on wastage of resources and free time of employees.
Communication: communication is the process in which transfer information and data one
person to another person(Simons, 2013). Its help to understand views and ideas of person. If they
have any issues and problems so easy to resolve them and provide proper satisfaction to them.
Proper communication is required to create healthy environment in the company so employees
can work effectively and achieve the objective and goals of the company.
(A) Difference between financial accounting and management accounting.
Financial accounting Management accounting
 Financial accounting is related to the
financial information and financial
position of the company.
 Management accounting is the refers to
financial and non financial information
and data of the company.
 Financial accounting is related to the
internal and external information of the
company.(Baldvinsdottir, Mitchell and
Nørreklit, 2010.)
 But management accounting is only
related to the internal information of the
company.
 Financial accounting is related to the
public data in the term of finance.
 Management accounting related to the
internal data of the company in which
only mention and calculate only
company;s related terms.
 In which working according to the
financial formate.
 In the other hand, management
accounting in no require any formate to
calculate financial data.
 Financial accounting is calculate on the
basis of yearly data of the company.
 Management accounting based on
quarterly and half yearly data of the
company.

(B) Importance of management accounting.
Management accounting is the systematic process in which mention all financial data
related to the company. In which help to make reports and financial statements by this managers
of the company take long term and short decision regarding company. Management accounting
play and vital role there is some importance those are following:
Determining to objectives and goals: Management accounting through determining and
identifying the goals and objectives of the business that help to define company's financial
positions and status(Ward, 2012).
Help to preparation of effective planning: Its help to prepare a effective planning and designing
of the business to invest into the market and which sectors to earn profit. Planning through
determine the future plan of the company on this basis try to get success.
Measurements of performance: Management accounting through measure the performance of the
company in the financial term. Its help to provide actual position of the company and their equity
and debt fund. In this case company how much liable to pay and how much capable to take
interest from the public all these things are help to determine company's positions and their
status(Lukka and Modell 2010).
2. Explain the different types of Management Accounting Systems and how it can be used by
other departments to improve their reports.
There are using many types of accounting systems and methods those are help to providing
proper and actual information regarding company in the financial term. Through this create a
effective financial report and statements of the company by which take decisions and develop
financial position of the company. So there are different type of management accounting systems
those are under the below:
Managerial accounting system (cost accounting system): Managerial accounting system in which
manage and control on all kind of activities and works related to the company. There is mention
all financial transaction that help to identify past and present position. In which including cost
accounting by this identify costing of products, services in the market and those comparing to the
standard level of the company's products. Its help to take effective decision regarding financial
position or status of the company( Bodie 2013).

Inventory accounting system: Inventory accounting system refers to inventories of the company.
Inventory items are identify bar code. In this accounting system records and transaction are
mention and collected related to inventory items are purchase by the company and sale by the
company in the market. There are calculate amount related to inventory transaction.
Job costing system: Job accounting system refers to production costing that occur on the basis of
customers orders regarding services and product. This cost complied when work for order by the
customers to company. In which including those cost that are not relating to the actual cost of the
production of products example, repairing of machinery, printing of papers and so more. These
kind of cost is relating to the job accounting(Otley and Emmanuel, 2013.).
Price optimising system: This management accounting systems refers to pricing of products and
services those are provide by the company to customers. In which mention production cost,
Illustration 1: Management accounting systems

promotional cost, offering cost and so more. All these kind of costs those are help to promote
products in the market these are calculate in this accounting system(Garrison and et. al, 2010).
TASK 2
Imda Tech (UK) Limited commenced business on 1 September 2010 producing special charger
for mobile telephone and other carry-on gadgets, the cost card of which is as follows:
£
Direct labour 5.00
Direct material 8.00
Variable production overhead 2.00
Fixed Production Overhead 5.00
Standard Production cost
£ 20.00
The fixed production overhead figure has been calculated on the basis of a budgeted
normal output of 36,000 units per annum. The fixed production overhead incurred in
September was £15,000 each month(Cinquini and Tenucci,2010).
Selling, distribution and administration expenses are:
Fixed £10000 per month
Variable 15% of the sales value
The selling price per unit is £35 and the number of units produced and sold were:

September (Units)
Production
2000
Sales
1500
Absorption costing
Fixed cost for month are give under the below:
Budgeted cost Actual cost
Production overhead £15000 £15000
Administration cost £10000 £10000
Working note 1.
Apportioned of fix cost per unit
£25000/2000= 12.5 per unit
Working note 2.
Calculation of production cost.
Direct material £8
Direct labour £5
Variable cost £2
Prime cost £15
Fixed cost £12.5
Total £ 27.5

Working note 3.
Calculate value of inventory and production
Opening inventory Production Closing inventory
Nil 2000*27.5= £55000 500*27.5= £13750
Working note 4.
Actual fixed production £25000
Fixed overhead £25000
Total Nil
Net profit using absorption cost:
Sales £52500(1500*35)
(-) cost of sales:
Opening inventory 0
Production £55000
Closing inventory ( £13750)
Total cost 41250
Net profit £27500
The costing method help to determine the net profit, production cost, variable cost and fixed
overhead. Imda Tech LTD of net profit is £27500 and total cost of this company is 41250. in the
income statement of the company which mention net profit and cost of the company in the
financial term(Luft and Shields, 2010.).
Marginal costing methods
Working note 1.
Calculate variable production cost
Direct material £ 8

Direct labour £ 5
Variable production cost £ 2
Total cost £ 15
Working note 2.
Opening inventory Production Closing inventory
nil 2000*15=30000 500*15=7500
Net profit using marginal costing
Sales £ 52500
Less variable cost
Opening inventory
Production 30000
Closing inventory -2500 -22250
Variable sales -10500
Contribution 12000
Less fixed cost
Fixed production overhead 10000
Selling and admin cost 10000 -12000
Net profit nil
The cost of the production increasing and decreasing of the company. Its help to increase profit
by this method easy to determine net profit of the company. In this method production is 30000
and closing inventory is 7500.
Marginal costing Absorption costing
Marginal costing is refers to variable cost of In the other hand absorption costing is refers to

the product. fixed cost.
Marginal costing is mainly divided into two
pars one is fixed overheads and second one is
variable overheads.
Absorption costing is divided into 3 parts
production, administration and selling&
distribution.
In this method shows profit volume ratio of the
company.
Absorption method in the net profit of the
company.
TASK 3
In the senior management meeting it was discussed and agreed that department
managers should have more involvement and take responsibility for their department
budgets.Despite this news was greeted with a welcome response yet managers have
requested for more information and training on budget preparation.
In the company all employees are not satisfied towards financial information of the
company( Scapens and Bromwich 2010.). Because company's department through not provide
any information and data so they are not able to take decision and not properly working in the
company. So by conducting the meeting to improvement in the company and also take proper
responsibility for all departmental budget and financial investment by the company. Budget of
the company show cost, expenditure and revenue help to determine future position and value of
the company that help to achieve objectives and goals. To providing the all information and data
to employees so there should prepare a budget of the company that may be made by the
company's head. In which mention all financial details and there are many types of budgets those
are under the below:
Master Budget: Master budget is the type of lower level budget its prepare by the all functional
areas of the company. In which mention all financial statements and their financial record. That
help to determine requirements by all the department and help to take decision.
Advantages: